Inflation continues to pose 'biggest risk' to portfolio performance

Inflation, the UK’s slow economic recovery and geopolitical conflict are seen as the most significant risks to the performance of UK investors’ portfolios, new research from RAW Capital Partners has found.

The Guernsey-based investment management firm commissioned an independent survey of 756 UK-based investors – all of whom have investments more than £25,000, excluding the value of their residential property, savings and pensions – giving them a list of different factors or events and asking which they perceived to be the highest risk.

Inflation ranks top, with 89% of respondents saying this presents a ‘high risk’ or ‘moderate risk’. This is followed closely by a slow economic recovery in the UK (88%) and geopolitical conflict, such as the wars in Ukraine and Gaza, (87%).

Lower on the list, 82% see high interest rates as a risk to their investors, while the US presidential election (81%) and climate change (79%) are also considered to pose notable risk to UK investors’ portfolios.

Ben Nichols, interim managing director at RAW Capital Partners, said: “Globally, economies have been struggling with the impact of high inflation for some time, and the action that central banks like the Bank of England have taken to bring it down has made it extremely difficult for any meaningful economic growth. This has clearly taken its toll on investors, with inflation remaining a major risk in their eyes, while a slower-than-hoped economic recovery in the UK is evidently another concern.

“Perhaps more surprising is how highly many of the risk factors scored. Most analysts and economists now suggest that the global economy has turned a corner, but our research suggests there remains a broad and pervasive anxiety among investors towards the current and future state of the investment landscape.

“With this in mind, investors must recommit to implementing robust risk management strategies to protect their investments against any volatility that these risk factors could produce. This means constructing balanced and diversified portfolios that are resilient enough to weather economic uncertainties, thereby enabling investors to stay on track with their long-term investment objectives.”